Samizdata quote of the day

“I think in the U.S. and in most of the world the public understanding of economics is abysmal. But it’s one thing not to understand something. I don’t understand brain surgery. It’s another to want to form policies on things on which you are ignorant. I hear the wonderful phrase “I want to make a difference” when it comes to policy. I would be horrified if I wanted to make a difference in brain surgery. The only difference is more people would die on the operating table. The only encouraging thing about public reaction to the crisis is that going by polls citizens seem to have more misgivings about some of these policies than politicians or the media. Still, though there have been studies that indicate the New Deal prolonged the Great Depression by years, what is also clear is it was enormously popular. FDR was elected four straight times, and more than once without ever having brought unemployment down to single digits. An economic disaster does not necessarily mean a political disaster. If we could raise the average level of understanding of economics to what Alfred Marshall had in 1890, the vast majority of politicians would be voted out of office.”

“I think in the U.S. and in most of the world the public understanding of economics is abysmal.”

That may be so, but then the understanding of economics of most economists, including Nobel laureates, is also abysmal. See Paul Krugman.
The disastrous policies of sky high deficits, money printing and “stimulus” waste are all perpetuated by economists. Greenspan, Bernanke, Geithner, Summers, Volker, a whole crowd of them.
The economists are more to blame for the mess we are in than the general public.

Combine a half-baked sense of value with oblique Force and you get the modern State – the clearing house of every two bit Philosopher King ready to mail a fist to whomever he pleases. People are entitled to whatever set of beliefs they cobble together out of the randomness of the cosmos in the conducting of their lives. Even pass on flying saucer based religions to your offspring if you want. But get over the impression that you’ve tapped into the Ether and are an oracle appointed to lead inferiors to the promised land.

We now have so few people who are willing to allow for culture unentangled with Force to lead the way. Everyone with an agenda has defaulted to an offensively aggresive on-switch. Force is the default mode for the amelioration of ideas and behaviors. It just wouldn’t be so alarming that most of the people on such offensives weren’t ignoramuses. But then again even if someone had legitimately rarified notions to share I’d still resist the Force.

But how do you change it? Can you fight Force passively? Do you engage Force with Force? Do you become what you are fighting? Can you stop once you’ve started? What happens if you don’t fight and one Philosopher King stands forth from the rest and takes over the thus far shared Apparatus and brings a hardline, singularly potent, form of Statism? Is it too late then?

While I debate these ideas in my own head we have increases in taxes, increases in regulation, increases in banning behaviors that do not directly harm life or property. Here in the US the Feds are taking over nearly every aspect of life and this is under the rather “softer” form of Statism. The Appartus is nearly complete.

Really? It’s because the public don’t understand eonomics? That’s the problem, is it?

Yes that is indeed the problem.

What do the vast majority of highly trained economists have to say? All robust Austrian free marketeer anti-statist anti-Keynesians are they? Hmm?

You can be highly trained as an astrologer but because astrology is preposterous and has no relation to reality, it is worthless.

The issue is that most ‘highly trained economists’ are trained in something that is fallacious as flat earth theory, which is to say their ‘training’ in fact trains them to have a very poor grasp of economics.

The issue is that most ‘highly trained economists’ are trained in something that is fallacious as flat earth theory, which is to say their ‘training’ in fact trains them to have a very poor grasp of economics.

That’s as maybe Perry, but it also illustrates the point. “We” are not arguing against the public. We are arguing against experts who mislead the public. We are a minority who believe (apparently as a matter of faith) in one school of economics. The majority of other people, be they economics professors or gas fitters, believe a different one. To argue that they are all wrong because they’re ignorant is– well, it’s an uphill struggle to put it lightly. We may as well be arguing that Relativity is wrong, all the physicists are wrong, and the public are stupid for believing it.

Can we prove them wrong? Can you prove you are right? Apparently not, so I’m told. And yet we blame the public for being ignorant?

“We” are not arguing against the public. We are arguing against experts who mislead the public. We are a minority who believe (apparently as a matter of faith) in one school of economics. The majority of other people, be they economics professors or gas fitters, believe a different one. To argue that they are all wrong because they’re ignorant is– well, it’s an uphill struggle to put it lightly. We may as well be arguing that Relativity is wrong, all the physicists are wrong, and the public are stupid for believing it.

There are a few misunderstandings here. I am not sure who the “we” are in this case, but among the broad libertarian/classical liberal/conservative side of the fence, are a few overlapping but occasionally conflicting schools of thought. Economics trainspotters will know that the “Austrian” school of economics is quite different in some ways from the “Chicago” one, etc.

But I do think that public ignorance of basic concepts of economics is a problem and it is a damning indictment of state education that this is so. But of course one cannot expect folk to be experts on this, but some understanding of the principles is essential if voters are going to be able to figure out whether a policy idea – such as steeply progressive tax rates, or free trade, or tariffs, or subsidies, etc – is a good idea or rubbish. If folk cannot at least grasp the idea of mutual benefits of trade, or the role of prices, or the fact of scarity, then frankly it is not surprising that so much public debate is conducted at the moronic level that it is, with demands for “free” this and “free” that, etc.

Of course, and this is a separate point, I am not sure how this is improved, at least not in the short run.

Johnathan, many of the “public” I’ve argued with on the internets are very well versed in economics. The problem is it’s Keynesian, marxist etc economics. It’s not the ignorant we need to worry about. They will actually understand stuff like “we can’t hand any more money out because the treasury is empty”. The people who are the problem are the “well versed” ones armed with all sorts of Keynesian and Marxist arguments about deficit spending and exploitation and “pump priming” and bullshit like that.

It’s common for the Left to consider themselves gods among men who understand how things are and need to shepherd the Stupid and Ignorant. We shouldn’t fall into that same mindset. Look back over the past century of disastrous policy and you’ll see constant pushing for it by the “educated” people. Keynes wasn’t a stupid uneducated man, and look at the fucking mayhem he’s caused.

Johnathan, many of the “public” I’ve argued with on the internets are very well versed in economics.

Yes, but Ian, the sort of men and women you and I debate on such forums tend to be relatively intelligent and interested in this topic, or related topics. Question: if the “experts” and their political masters are such Keynesian charlatans and twerps, how come the public, whom you say are often smarter in a gut-instinct sort of way, vote for these terrible people?

And I do agree that a lot of folk who think of themselves as ordinary citizens are often far wiser than their “betters”; I’d sooner take the economic judgement of a taxi driver or shopkeeper over Gordon Brown, iDave, or the hopelessly over-rated Vincent Cable.

We are a minority who believe (apparently as a matter of faith) in one school of economics

Faith? Since when is a critical preference based on reason ‘faith’?

Can we prove them wrong?

You have but to read a newspaper for all the evidence ou need to do that.

Can you prove you are right? Apparently not, so I’m told.

A weird statement to say the least. Keynesianism has been repeatedly falsified, the Austrian school, whilst actually a series of related theories, is a vastly better description of reality. Short of divine revelation, what were you expecting?

And yet we blame the public for being ignorant?

Yes because they vote the very people who prey on them, in the name of a self serving creed of flat-earth economic theories, into office again and again and again. If that is not ignorance then what is?

I was simply going to say that I am more impressed by Thomas Sowell every time he opens his mouth, but there are other great comments that beg for my prattle.

” Johnathan, many of the “public” I’ve argued with on the internets are very well versed in economics.

Yes, but Ian, the sort of men and women you and I debate on such forums tend to be relatively intelligent and interested in this topic, or related topics. Question: if the “experts” and their political masters are such Keynesian charlatans and twerps, how come the public, whom you say are often smarter in a gut-instinct sort of way, vote for these terrible people?”

This is the mystery of the ages. My mother talked like Ronald Reagan but every damn time she went to the polls she voted the straight Democrat ticket. I at least had an economic epiphany midway through Reagan’s second term and haven’t voted for a democrat since (I keep the registration to keep credibility with my Stalinist brothers and their wives).

“The people who are the problem are the “well versed” ones armed with all sorts of Keynesian and Marxist arguments about deficit spending and exploitation and “pump priming” and bullshit like that.”

This is the best statement of the case I have ever seen. I think the problem is that the graphs they use have no numbers on them and the little Marxist “economists” all think that every recession will automatically lead to a depression and we’ll all be stuck in their beloved “Liquidity trap” as they demonstrate in whichever bogus graph that appears in.

Nigel nails it. Also, looking at it another way: it really isn’t all that complicated, and most people really do know how it works: you don’t spend more than you earn, you save for a rainy day, you only borrow if you know you can pay it back, etc. It’s like any other sophisticated system or piece of machinery: you turn the key, look in a mirror, start slowly, watch for traffic. You only need to understand how it works when something goes wrong with it, usually because someone has been messing with it. So the reason that so many people feel lost and no longer trust their good instincts is because the system has been messed with and no longer functions properly.

I agree with Prof Sowell and and earlier commenter that people are abysmally educated in general, and about the functioning of basic economic priciples in this particular case, but this complaint misses the underlying problem.

Once again, the danger to us all as free, productive members of society is not the ignorance of the public about the ins and outs of some subject, nor even the ignorance among the elites of politics, and other wielders of influence in academia and cultural areas such as Oprah or Jon Stewart, but the coupling of this ignorance with a political philosophy that allows the state to inject itself into any and all situations.

The people that settled North America, and established generally free and innovative social and economic structures, with certain glaring and painful areas of failure and contradiction, esp. as regards race, were certainly not as well educated as the average citizen is alleged to be today. Many could not read or write.

What was significantly different as well, and a critical factor, was the elementary fact that the state was as close to minimalist as the world had seen for many an age.

When the horse drawn plow industry began to fail because there were tractors replacing horses, no one in Washington prepared a huge subsidy to maintain the obsolete industry. The old plow companies either switched to the new style plows or went out of business.

Toward the end of the 19th century, and gathering both momentum and power into the 20th, the utterly vain and utterly incorrect notion that the government could and should take control of an increasing range of society’s economic activities for some amorphous and forever unattainable “public interest” gained great popularity among the elites of both political theory and practice.

The result, after more than a century of relentless effort by several generations of collectivists and their apologists, is the malignant growth of state power we see all around us.

It would not matter how ignorant anyone was, from the high school drop out janitor to the President, if the citizenry had not so foolishly allowed and supported this continuing usurpation of their rights and liberties.

The chickens, the very large and hungry chickens, are coming home to roost. And yes, they are the step-children of ignorance.

But even more, they are the direct descendents of cowardice and self-indulgence by free citizens who surrendered that birthright for a bowl of pottage.

The bible says that it profits a man nothing if he gains the whole world, but forfiets his soul.

And therefore, what have we gained if we surrender our natural rights and liberties for the illusory benefits of “free” this or government paid that.

What the state giveth, the state can take away, especially if someone makes too much noise and becomes a bother.

What we are now witnessing is the modern equivalent of the dreams of the pharoah that Daniel interpreted, “seven fat years followed by seven lean”.

And that writing, gradually becoming legible on the wall? Mene, mene, tekel upharsin.

The “success” and “acceptability” of the current method of doing economics is due to good old-fashioned vested interests. By supposedly giving free this and free that you (1) ensure that you and your friends get a good slice of the cake; (2) exclude anyone with any scheme for which you can’t see a profit for you or your friends; (3) prevent anyone with a scheme which has some real chance from going forward and hopefully stealing their idea at the same time; (4) force any recipient of “free” money to hand over their soul. In the old days when only a small elite were allowed to have a bank account and hence credit, most lower income groups evolved schemes such as credit unions and similar in order to obtain what the official economic system denied them. This is a frightening prospect for the postholders (and hence stakeholders) in the modern state and the “free” handout system is used to discourage any alternative system of obtaining liquidity.

The Foundation for Economic Education has been trying to teach Americans better economics for sixty years.

However, the efforts of FEE (and its Freeman magazine and the Ludwig Von Mises Institute and …….) are undermined by the fact that the media (not unreasonably) tent to follow the majority of university economists – and these people either know nothing about economics or lie their heads off.

The example of Nobel Price winner Paul Krugman is indeed a good one – this is a man who says his favourate part of “economics” is the “paradox of thrift” i.e. the utterly false (indeed crackbrained) notion that saving money is bad for the economy in a recession.

The only oppostion to the statist policies of Comrade President Barack Obama (with his Sraffa style weird mixture of collectivism and Keynesianism) that we can expect from “economist” Paul Krugman is that the policies are not statist enough.

And the other nobel price winner the media cite (Stickinsect) has the same basic fallacies in his thinking – his differences with Krugman being over more minor matters.

However, Thomas Sowell himself may not be entirely part of the solution rather than the problem.

I say “may” because I really do not know.

That is the problem with the Chicago School – they vary on the most important matter that faces us.

Whether or not slumps are caused by previous credit money expansions (whether or not prices in the shops have gone up), and HOW TO REACT TO A BUST.

Some Chicago School people have opposed the policy of the Federal Reserve and the rest of the powers that be in expanding the money supply and bailing out favoured corporations (not just banks – but also AIG and General Electric and ……).

But some Chicago School people have not opposed the policy of expanding the money supply in the face of the bust. They do not believe that prices should be allowed to fall, malinvestments be liquidated, and markets be allowed to clear. This would (to these members of the Chicago School) be the evil “deflation” that would lead to mass unemployment for years and years (they ignore such things as what happened after the 1921 bust when, unlike 1929, markets were allowed to clear).

It is the fact that the Chicago School are divided on the most basic matters that face us that means they are not effective in fighting the “mainstream economists”.

“You are an Austrian School man Paul – you would say these things”.

Guilty as charged.

To end with some optomistic stuff.

The reductions in wages mean that unemployment will not go up so high in Britain as it otherwise would – Mrs Thatcher’s removing of some restrictions on the labour market (really Norman Tebbit’s – as no real action was taken till he became Employment Sec, hence the vast increase in unemployment in the slump when James Prior was Employment Sec) are still having some good effects.

Unemployment will still go up – but not as much as it would have done.

Of course the above will make no sense to those people (i.e. ignorant “economists” and others) who think employment depends on “demand” (credit money expansion) rather than a flexable labour market.

Lastly do not underestimate the amount of economic education Americans are getteing,

Millions of Americans watch the Glenn Beck show on Fox News every day – and the people he has on the show and the books they suggest people buy (which they then do buy – check with Amazon) are giving Americans an education in real economics.

Both the better sort of Chicago School people and Austrian School people are welcome on the show.

Of course some statists have been on the show (such as the two authors of “Animal Spirits”) – but it does give a fair (indeed very fair) hearing to real free market people.

“My test is that a real economist is an economist who believes that any quantity of money is adequate. A quack economist is an economist who believes that increasing prosperity – or even continuing prosperity – demands a continuously increasing quantity of money.

…

Every nonneutral dilution can be defined as the combination of a neutral redenomination and a nonneutral redistribution.

And this is why dilutionists are quacks. Dilutionists are quacks because it is impossible to imagine a way in which the systematic pilfering of wallets could somehow be essential to commerce and industry.

…

And there is an even more troubling fact.

The fact is that all famous 20th-century economists – Fisher, Keynes, Friedman, Samuelson, Galbraith, etc, etc – and 99.9% of working economists today are dilutionists. In other words, they believe that a closed-loop monetary system, or even a nearly-closed system such as the gold standard, is impractical or at least suboptimal.

We can even link to bloggers. Cowen and Tabarrok: dilutionists. Kling and Caplan: dilutionists. McArdle: dilutionist. Mankiw: dilutionist. Levitt: dilutionist. DeLong: major dilutionist. Und so weiter. Pretty much your only nondilutionists are to be found in the Austrian School, and even there you need to be careful.

Therefore, we are left with the conclusion that either (a) the above analysis is in some way wrong, or (b) 20th-century economics was dominated by quacks, and mostly remains so.”

My comment was terribly written (as they tend to be at 2 am – sigh). I was thinking along the same lines as VR was, only he has done it incomparably better (as always).

As to Perry’s recurring point about voting (or rather not voting): I think it would only work if it was some kind of organized “movement”, meaning that only if large enough percent (I have no idea how large) of the population refrained from voting would the whole system finally and clearly lose its legitimacy.

Roosevelt was very smart to include lots of money for writers and “artists” in his New Deal and they in return supported Roosevelt by writing and creating “art“ which supported Roosevelt to the public. Even today you can still find a few survivors of that New Deal propaganda effort still supporting Roosevelt.

The present money system has spent lots of money buying up academia and media and in return they both pump out “economists” and news stories that support the present system. Especially since the news media seems much more impressed with someone if they have worked for the right corporations/government agency or if they got a degree or award from the right organization then on whether or not they can predict present and future economic performance

The people did understand Economics once upon a time in a Micawberish sort of way.

Then in the 60s came easy credit.
It was popularly called “the never never” in that you never stopped paying for it. I you actually did the sums you found that you were paying five times as much for something than if you had just saved up for it and bought it outright.
But people were encouraged to do this because the sums coming out of their pocket each week were small and managable.

This enabled Harold Wilson to stand up and announce that he had devalued the pound, but not to worry, this has not affected the pound in your pockets, with a straight face, and get away with it.

I was taught Keynesian Economics, but our teacher, being a smart man, also told us about the Austrian school.But with one proviso…

For gawds sake boys, dont put any of that in your Economics A level paper, or they will fail you!

Economics at the core is simply nothing more than distilled common sense. Regrettably common sense is not all that common. The rest is voodoo dressed up as pseudo science; intended to baffle the masses with bullshit.

FDR was quite successful politically, its not difficult to understand why. Spread other peoples money to a favored group or constituency and not only have they become indebted to you, you have bought their votes as well. Politicians are not all that stupid, they understand well enough what they are doing and the effects it can have. as long as your indebted to them, they own you. Really, it is nothing more than a old style Mafia protection racket. Every so often you are allowed to get a bit ahead and flush, then things “happen” and once again you are reminded of just how much you need your “protectors” and why you need to pay for your protection by way of votes and taxes; and of course one goes along with it less bad things should happen to you. Especially if you are one of those who are incapable of rising to your current level with out your benefactors. Like Fidelistas or Chavistas in Latin American or the permanent welfare class in the US and in Europe. The real appeal of socialism is that allows the scum to rise to top instead of the cream. And the scum know without it they can never on their own merit ever rise to the top.

He was a great bloke who taught English and History, as well a Economics.

He was a WW2 vet who did a catchup quicky qualification to become a teacher, like many of my teachers of the time.

But I cant remember his real name!
See we had nicknames for all our teachers and his was Biffa!
Cos he did boxing as well(till elfen safety banned it!)

He was living in Australia with his children when I last heard of him, about 8 years ago.
Perhaps Counting Cats can do an all points bulletin for him, cos I would dearly love to talk to him again, and say thanks for all he inspired in me!

Never mind Alfred Marshall, if we could raise the average level of straightforward numeracy to that expected for a chemistry O-level until the 1980s, most politicians should be out of a job.

We have virtual constitutional collapse in Britain over thousands misspent in MPs’ allowances only because the story is told in terms of concrete household objects purchased that the public can comprehend. The countless billions pissed away over decades in quango and local authority and departmental budgets that bear no relation to meaningful purpose or output, have completely failed to register. That’s going to carry on indefinitely.

Guy: I agree!
Never mind the conflicts between Keynesians and Austrians.

Even if the public understood only those things on which almost all economists agree, such as the dangers of protectionism, the principle of comparative advantage, the counter-productiveness of price controls, and the concept of opportunity cost, the impact on our politics and society would be nothing short of revolutionary.

Given the current rate of change, the above distinction is not terribly significant.
It is clear to all, I hope, that what is going on now is insane. The print presses of all countries are working at full pace, free of any constraints.

Quackery is a mild word to describe this insanity.

All perpetrated by economists. And politicians, of course, but no one expects them to understand economics, science, climate or anything whatsoever, except PR.

I know that he was terrible in X Y Z ways, but I have always had a liking for the man (those I words that may be used against me in internal disputes), perhaps because he work (found rotting away in the school library) made so much more sense than the utter rubbish we were taught at school.

RAB – you had a teacher who had heard of the Austrians and actually covered them in class?

Astonishing.

Still weird things happen – when I was very young I was busy putting out letters in the hall of Kettering Conservative Club (with many other volunteers) and I got to talking with an elderly gentleman.

The discussion (whilst we were waiting for more letters to do) turned to economics – and the man talked about Eugen Boihm-Bawerk (about whom, I am ashamed to say, I knew virtually nothing) – both about such things as the theory of interest (time preference) and about the man personally.

The gentleman seemed to have known Bohm-Bawerk personally – but surelly that can not have been true (I am not saying the man was being dishonest, I must just be confused in my memory) as Bohm-Bawerk died in 1914.

I met lots of interesting people in my young days.

Those were the days when it was considered a good thing to have a done a lot of voluntary work for the Conservative party (rather than just turn up, having never been a member or given any help, expect to be an M.P.) and it was also a time when many Conservatives (far more than the liberal elite would admit with their jibes about the “stupid party” and so on) were interested in political ideas and principles.

Now any old waffle about “public service” and “values” will do.

Still I must not look at the past with rose coloured glasses.

After all vile people like “Ted” Heath (and he was vile – having a “good war” does not alter the fact that the man was rotten to the core) used to be leaders of the Conservative party.

Mr Cameron has his faults – but Edward Heath was a lot worse.

Friends of Mao (and it was real admiration – not a tactical move) are no friends of mine.

I am still waiting for the expose of how he got so fabulously wealthy despite having no inherited wealth, on his megre (60s 70s) Parliamentary salary.
If I was a cynical person I might assume that it was for selling this country down the river 😉

Yes Biffa did know about the Austrian school.

See in my day(the late 60s) O Levels were about remembering and regurgitating facts.Once you had mastered that, then A levels were about encouraging you to think for yourself, and question things positions an opinions.

I remember him setting an essay question, very early in the lower 6th.
On the face of it, it looked like a straight supply and demand curve question, but I thought, hey this is A level! there has got to be more to it than that?
Well there was nothing specific on it in our handed out textbooks, so I went down the Central Library and researched it.
I didn’t quite nail it down, but I was the only one in my class that had actually bothered to think outside the box.
That earned me great respect from him, which I appreciated. Previously I had always been regarded as the class clown by my teachers.

Now of course, the current A levels are on a par, not with the old O levels, but more like the CSE’s that the thick folk took back in my day, just to give them some sort of qualification to show an employer.

The British educational system has been holed below the waterline for decades now.

As evinced by that reality tv prog of a few years ago, which took back current 15 year old supposed straight A students, to a Grammar School regime.

The first maths paper they took they assumed to be an old O Level paper.
Out of 35 only 3 passed it, and they had all come from Public School (private to the rest of youse outside Britain).

Except it wasn’t an O Level paper at all, it was the 11 plus maths paper of of 1959.

I remember hearing not so long ago that Karl Marx had been voted the most influential economist in history in some poll. Ehh . . economist?

Marx, it seems more accurate to say, was a social philosopher. He had pre-conceived socially-based conclusions, and set out to manufacture a theoretical “economic” structure which could be used, in the public mind, to validate his social theories. Marx’s “economics” was, and is, pure bullshit. The fate of the former Soviet bloc should provide a hint.

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